TaxTMI 
TaxTMI 
2005 (9) TMI 55
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....hat the interest chargeable under the Interest-tax Act was only interest on loans and advances and securities do not fall within the purview of the definition of "interest" under the Interest-tax Act. The banks' contention was rejected. The entire interest on securities was brought to tax. Appeals were preferred before the Commissioner of Income-tax (Appeals). The appeals stood dismissed. Thereafter, the banks preferred appeals before the Income-tax Appellate Tribunal. The Tribunal in the leading judgment Canara Bank v. Deputy CIT ruled that interest on securities cannot be brought to tax but only the interest on loans and advances is chargeable to tax. The Tribunal ruled that in its considered view the provisions of section 10A of the Interest-tax Act have no application. It has also ruled in the order that the interest on securities cannot be brought to tax but only the interest on loans and advances is chargeable to tax as amended by the Finance Act. The Tribunal ruled that the authorities are not justified in bringing to tax interest on securities for all the four years under appeal. The Revenue sought for a reference by way of application under section 256(1) of the Income-t....
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.... of the Tribunal, to say that the order of the Tribunal is proper and legal. The Tribunal after analysing the various relevant factors has come to the right conclusion in answering this issue in favour of the assessee. In so far as the reopening is concerned, he would say that the reopening is bad in law in terms of the reasons for reopening as contained in the file of the Department. He would further invite our attention to the Interest-tax Act in particular to section 2(7) and section 28 to say that no tax could be levied on the interest received towards security for the purpose of loan at the hands of the Government. He says that the Legislature in its wisdom has chosen to exclude the inclusion. The intention is not to include and any inclusion in terms of the argument of the Revenue would be an act of legislation by this court and that legislation is impermissible in terms of the well-settled legal principles. Learned counsel also invites our attention to various other provisions of the relevant statute to say that "interest on securities" is entirely different from "loans and advances". In the case of "loans and advances" interest is paid and in the case of "securities" inter....
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....information" for the purpose of the Act. He would rely on a judgment of the Supreme Court reported in Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1, wherein the Supreme Court has considered that the word "information" in section 34(1)(b) included information as to the true and correct status of law and so would cover information as to relevant judicial decisions. He would say that in the light of the notification the Department is justified in reopening the assessment under section 10(b) of the Act. Sri Sarangan, learned senior counsel on the other hand would rely on Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC) to say that the opinion of an internal audit party of the Income-tax Department on a point of law cannot be regarded as "information" within the meaning of section 147(b) of the Income-tax Act. In the light of these judgments, we factually wanted to know what was the "information" that was available to the Assessing Officer in terms of the material available on record. We see from the order of the Tribunal that the Assessing Officer has given reasons for reopening and the same are culled out as under: "It is seen from the original return of charge....
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....nge in opinion and therefore the assessments had not been validly reopened under section 147(b) of the Income-tax Act. The said judgment is applicable to the facts of this case. Material facts would show that there is only change of opinion and that there is no information as such as required in terms of section 10 of the Act. In the light of this clear factual position available on record, we are of the view that the Department could not have reopened the assessment in the absence of no acceptable information available in terms of section 10(b) of the Interest-tax Act. In the light of this clear factual position available on record and also the judgment of the Supreme Court, the argument of the assessee has to be accepted. In the given circumstances, we do not think that it is necessary to refer to all the other judgments for the purpose of deciding the issue in question. In these circumstances, we answer this question in favour of the assessees. Re. question No. 2 The second question that is referred to us is whether the Income-tax Appellate Tribunal is right in holding that the reopening of assessment under section 10 of the Interest-tax Act is bad in law. This issue would co....
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....support of his submission. In the light of the rival submissions, we are required to see the definition in terms of the Interest-tax Act. Section 2(7) prior to substitution read as under: "'interest' means interest on loans and advances made in India and includes- (a) commitment charges on unutilised portion of any credit sanctioned for being availed of in India; and (b) discount on promissory notes and bills of exchange drawn or made in India, but does not include- (i) interest referred to in sub-section (1B) of section 42 of the Reserve Bank of India Act, 1934 (2 of 1934); (ii) discount on treasury bills;" The said section substituted by the Finance (No. 2) Act, 1991 read as under- "2.(7) 'interest' means interest on loans and advances made in India and includes- (a) commitment charges on unutilised portion of any credit sanctioned for being availed of in India; and (b) discount on promissory notes and bills of exchange drawn or made in India, but does not include- (i) any amount chargeable to income-tax, under the Income-tax Act, under the head 'Interest on securities': (ia) interest referred to in sub-section (1B) of section 42 of the Reserve Bank of India Act, 1934....
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....ct, and showing the same under the head 'Investment' and not under the head 'Loans and advances' in the balance sheet, since the assessee is compelled to make a certain percentage in the approved securities in the stated institutions, from the point of view of the assessee, the Tribunal held that the interest on debentures would amount to interest on securities, and, therefore, goes beyond the purview of the provisions of the Interest-tax Act. Therefore, according to the Tribunal, the interest on debentures cannot be considered as interest on loans and advances. In view of the definition given by various authorities with regard to 'debenture', we have to come to the conclusion that the debentures are also in the nature of securities. Under such circumstances, we are accepting the finding given by the Tribunal that interest on debentures is interest on investment. The contention of the Department was that while ascertaining the character of the interest received on debentures, one should consider the Interest-tax Act and not the Banking Regulation Act for charging the interest under the Interest-tax Act. However, according to the assessee, they are bound by the Banking Regulation Ac....
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....wer is excluded from the definition of the word 'interest' in section 2(7) like in the case of discount on treasury bills because, in such cases, the Government is the borrower. Further, loans and advances, as a concept, are different and distinct from investments in the commercial sense as also in the accounting sense as also under sections 370 and 372 of the Companies Act as also under section 29 read with Schedule III of the Banking Regulation Act, 1949, as also under section 13(1)(d) and section 11(5) of the Income-tax Act. Similarly, the definition of the word 'interest' in section 2(28A) of the Income-tax Act vis-a-vis section 2(7) brings out the difference between lending on the one hand and investment on the other hand. Therefore, one has to read section 2(7) in the context of the scheme of the Act and, if so read, it is clear that gross interest on dated Government Securities received by the petitioner from the RBI amounting to Rs. 15,69,41,050 cannot fall under section 2(7) of the Interest-tax Act." The court has further noticed as under: "In the present case, if one construes section 2(7) in the context of the object of the Act and the scheme of the Act, it is clear th....
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.... definition vide P. Kasilingam v P.S.G. College of Technology [1995] Supp 2 SCC 348. When we say that a word has a certain meaning then by implication we mean that it has no other meaning vide Punjab Land Development and Reclamation Corporation Ltd. v. Presiding Officer, Labour Court [1990] 77 FJR 17; [1990] 3 SCC 682. However, when certain other categories are added then it means that only those additional categories will be included within the definition and none others, vide Mahalakshmi Oil Mills v. State of A.P. [1989] 1 SCC 164 ; [1988] 71 STC 285 (SC)." Again at page 653 the court has held as under: "The Supreme Court observed that the word 'includes' in the above definition is used to enlarge the meaning of the preceding words and it is by way of extension, and not for restriction. In fact this is precisely the meaning, which we are giving to the word 'interest' in section 2(7) of the Interest-tax Act. The word 'includes' used there also enlarges the meaning of the preceding words, that is to say, the word 'interest' means interest by way of loans and advances, and two other items also. However, the enlargement of the definition is only to the extent mentioned in the defini....